Business Life Insurance
Why Business Owners Need Life Insurance
Life insurance for business owners is about financially protecting your company just as much as it’s about protecting your loved ones. Here are some ways you can use life insurance as a business owner.
Keep your business running
Business owner life insurance is also a great way to keep your company afloat in good times and bad. It could be used to pay off your business debts, supplement cash flow and cover expenses needed to find your replacement if you died.
Likewise, if your business owner life insurance policy has a cash value component, you could tap into those funds to fuel tax-free business growth—even while you’re still alive.
Fund partnership agreements
If you have business partners, you most likely have a partnership agreement in place. This agreement typically stipulates that if one partner dies or becomes incapacitated, the surviving partners have the right to buy out their share of the business. Life insurance can help fund this buyout.
Equalize an estate
If you own a family business, you could also use life insurance to make sure everyone gets an equal inheritance.
For instance, say you have two kids. One works for the family business, while the other one doesn’t. Insurance can assist in estate planning to allow the child in the business to inherit the corporation’s shares while the other child receives an insurance payout.
Protect your family
What would happen to your family’s finances if you were to die unexpectedly? They could be left with substantial debts, a lack of income and potentially no way to move forward. Life insurance can replace your income so your loved ones can maintain the same standard of living.
How Does Life Insurance for Business Owners Work?
The main purpose of life insurance for business owners is to provide financial protection for a company in the event of the owner’s death. The beneficiary can use the death benefit to pay off debts, support the family, or keep the business running—whatever the policyholder wishes.
For example, if you have business partners, business life insurance could be used to buy out your share (or their share) of the business should one of you die. That way, the business can continue running as planned, and your family doesn’t have to stress about what to do with it.